NATURAL GAS: For Paper Transport, transition to natural gas wasn’t about fuel savings
October 23, 2012
HOUSTON, Texas -- When Paper Transport, a 370-truck regional carrier based in Green Bay, Wisc. decided to dabble in natural gas, it wasn’t the fuel savings that drove the decision. Instead, the company wanted to shield its customers from...
HOUSTON, Texas — When Paper Transport, a 370-truck regional carrier based in Green Bay, Wisc. decided to dabble in natural gas, it wasn’t the fuel savings that drove the decision. Instead, the company wanted to shield its customers from diesel price volatility, explained Joe Shefchik, vice-president, sales and solutions with the carrier.
“There’s not a ton of money to be saved (in fuel),” Shefchik said. “Any money that can be saved, I hope is held by the carrier because we’re taking the risk in the equipment. But when diesel does what it does (fluctuates), there’s no way for customers to plan their margins. They can’t project what their ROI is going to be. The stability of natural gas lends itself towards knowing what fuel is going to cost next week, next month and a year from now.”
Shefchik pointed out a major difference between the pricing of natural gas and diesel: For every gallon of diesel, $2.85 can be traced back to the commodity, in this case crude oil. On the other hand, only 48 cents of the cost of a gallon of natural gas is the cost of the gas itself. This means that if commodity prices double, diesel would go up $2.85 per gallon while natural gas prices would only increase by 48 cents. This formula explains diesel’s vulnerability to wild price swings, which natural gas is somewhat insulated against.
As for the cost savings associated with natural gas, Shefchik said the shipper pays for the fuel anyways. For that reason, Shefchik also argued it will take committed shippers to drive any large-scale shift to natural gas in the North American trucking industry.
“It’s going to come down to multiple large shippers making a commitment to make it happen,” he said. “They’re the people who can do it and they’re the people who can make it happen.”
Unlike most carriers, whose forays into natural gas came after detailed analysis and forecasting, Paper Transport decided to buy natural gas-powered trucks almost on a whim. The carrier wanted to diversify its customer base and felt it could do so by differentiating itself in some way from other van fleets. Shefchik and the company’s president began bandying about the possibility of giving natural gas a try on a road trip and decided to purchase two trucks and give it a shot.
“We went out and bought two trucks. If it worked well, we’d continue to add to the fleet,” Shefchik recalled. “We wanted to prove it out. If we buy two trucks and it totally fails, it fails. That’s the type of risk you can be comfortable with in a privately held organization.”
The experiment didn’t fail. The company’s first two CNG-powered Freightliner Business Class M2s were delivered in February 2010, and five more were added to the fleet that September. Another 10 CNG tractors were added in December 2011 and 15 more are on order. Shefchik said there’s not a lot of money to be saved in fuel; but shippers now appreciate the predictability of fuel costs. The company is saving $1.70 per diesel gallon equivalent, but saw its fuel mileage drop from 7.2 mpg to 5.5. Maintenance costs are running about three cents per mile higher than diesel, due largely to shorter oil change intervals and a costlier engine oil. There’s also a presumption that the CNG engines will have to be rebuilt earlier than their diesel equivalents, Shefchik said.
The trucks have been embraced by drivers, otherwise the project wouldn’t have been pursued, he added.
“If the driver is not on-board, this is going nowhere,” Shefchik said. “I can say for certain, we have not had problems with driver acceptance.” This was somewhat surprising since the CNG trucks require more frequent fill-ups, which also take longer than fuelling with diesel. Shefchik said the company was honest with drivers about the inconveniences they’d encounter.
“We have to fuel more regularly, the stations are inadequate, it takes half an hour to fill the truck, which is not real good for driver hours-of-service, but it was a top-down commitment. We said ‘Hey, we’re doing it; you’re going to have problems but we’re going to compensate you for them to some extent’.”
Truck News is Canada's leading trucking newspaper - news and information for trucking companies, owner/operators, truck drivers and logistics professionals working in the Canadian trucking industry. All posts by Truck News